COMMISSIONER OF INCOME TAX vs. RAMNIKLAL JIVANLAL KINARIWALA

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ITR/47/1990HC GujaratGJHC24013234199016 January 2001Author: HONOURABLE MR. JUSTICE J.M.PANCHAL,HONOURABLE MR. JUSTICE MOHIT S. SHAH2 pages
AI SummaryAllowed

What did the High Court hold?

The High Court held that the interest payment was not disallowable under Section 40(b) of the Income-tax Act, 1961. The Court's decision was based on the principle laid down by a Division Bench of the same court in the case of Sunil J. Kinariwala vs. CIT (1995) 211 ITR 127. The reasoning implies that the earlier decision established that such interest payments to partner trusts were indeed allowable. Therefore, the reference was answered in favor of the assessee and against the revenue. The operative direction was to dispose of the reference accordingly, with no order as to costs. No issue was expressly left undecided.

What were the facts?

The assessee, Ramniklal Jivanlal Kinariwala, claimed a deduction for interest payments totaling Rs. 39,471/- made to three trusts that were partners in his firm. The Assessing Officer (AO) disallowed this claim under Section 40(b) of the Income-tax Act, 1961. The Commissioner of Income Tax (Appeals) [CIT(A)], relying on the Gujarat High Court's decision in CIT vs. Sajjanraj Divanchand (126 ITR 654), held that the interest was not disallowable. The Income-tax Appellate Tribunal (ITAT) upheld the CIT(A)'s view. The revenue preferred a reference to the High Court of Gujarat for the assessment year 1979-80.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the disallowance of interest payment totaling Rs. 39,471/- paid to three trusts, which were partners, is justified under Section 40(b) of the Income-tax Act, 1961? Assessee's contention: The judgment does not record any specific arguments made by the assessee before the High Court. However, the CIT(A) and the Tribunal had held in favor of the assessee, finding the interest payment not disallowable. Revenue's contention: The learned counsel for the revenue stated that the controversy in the present reference is concluded in favor of the assessee by a Division Bench decision of the High Court in Sunil J. Kinariwala vs. CIT, (1995) 211 ITR 127.

Which sections of the Income-tax Act were involved?

Section 40(b)

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 47 of 1990

For Approval and Signature:

Hon'ble MR.JUSTICE J.M.PANCHAL and Hon'ble MR.JUSTICE M.S.SHAH

============================================================ 1. Whether Reporters of Local Papers may be allowed : NO to see the judgements?

2.

To be referred to the Reporter or not? : NO 3. Whether Their Lordships wish to see the fair copy : NO of the judgement?

4.

Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder?

5.

Whether it is to be circulated to the Civil Judge? : NO -------------------------------------------------------------- COMMISSIONER OF INCOME TAX Versus RAMNIKLAL JIVANLAL KINARIWALA -------------------------------------------------------------- Appearance: MR AKIL KURESHI with MR MANISH R BHATT for Petitioner NOTICE UNSERVED for Respondent No. 1

--------------------------------------------------------------

CORAM : MR.JUSTICE J.M.PANCHAL and MR.JUSTICE M.S.SHAH

Date of decision: 16/01/2001

ORAL JUDGEMENT (Per : MR.JUSTICE J.M.PANCHAL)

At the instance of the revenue, the Income-tax Appellate Tribunal, Ahmedabad Bench "A" has referred the following question of law for opinion of this Court in respect of Assessment Year 1979-80 :-

"Whether on the facts and in the circumstances of the case, the disallowance of interest payment totalling to Rs.39,471/- paid to three trusts, which were partners is not justified u/s. 40(b) of the I.T. Act, 1961 ?"

2.

The assessee had paid interest of Rs.39,471/- to trusts which were partners and claimed the allowance in respect thereof. The claim was disallowed by the ITO under Section 40(b) of the Income-tax Act. The CIT(A) sundar/-

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